Econ2106, FINAL - Assignment Essays

question

2 gas stations stand on opposite sides of the road: Rutter's Farm Store and Sheetz gas station. Rutter's doesn't even have to look across the highway to know when Sheetz changes its price for a gallon of gas. When Sheetz raises the price, Rutter's pumps are busy. When Sheetz lowers prices, there's not a car in sight. Both gas stations survive but each has no control over the price.

Q1: These gas stations operate in a ______ market
Q2: The price of a gasoline is determined by ______.
Q3: The marginal revenue from gasoline equals ______

answer

Q1: perfectly competitive
Q2: market demand and market supply
Q3: price

question

The price elasticity of demand for any particular perfectly competitive firm's output is

answer

infinite

question

Which of the following is always true for a perfectly competitive firm?
A.) MR = ATC
B.) P = AVC
C.) P = ATC
D.) P = MR

answer

D.) P = MR

question

Which of the following is true regarding perfect competition?
I. The firms are price takers.
II. Marginal revenue equals the price of the product.
III. Established firms have no advantage over new firms.

answer

I, II, & III

question

(Perfectly Competitive Market) The firm's shutdown point occurs when __________________

answer

The Marginal Cost = Average Variable Cost

question

Go look at Question 6, 7, 8, 10, 13, 14 on HW 8

answer

...

question

A firm's shutdown point is the quantity and price at which the firm's total revenue just equals its

answer

total variable cost

question

In the short run, a perfectly competitive firm's economic profits ________________________

answer

might be positive, negative (an economic loss), or zero (a normal profit)

question

The short−run market supply curve is ________________

answer

the sum of the quantities supplied by all the firms.

question

If firms in a competitive market are ______, then there is an incentive for firms to _______ the market.

answer

making a positive economic profit; enter

question

When some firms exit a market in which firms incur economic losses, the market supply curve shifts ______ and the market price ______.

Each remaining firm's economic loss ________

answer

leftward; rises

decreses

question

In a perfectly competitive industry, a permanent decrease in demand initially brings a lower price, economic ________________

answer

loss, and exit from the industry

question

Initially, a perfectly competitive industry that has 1,000 firms is in longminus−run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price ________,

firms with the new technology make ________ profits,

and firms with the old technology ________.

answer

falls

positive economic

incur economic losses

question

A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a

answer

loss of exactly $27.

question

look at question 20 on HW 8

answer

...

question

A ______ monopoly is a market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright.

answer

legal

question

A ______ monopoly is a market in which economies of scale enable one firm to supply the entire market at the lowest possible cost.

answer

natural

question

A monopoly arises for two key reasons, which are ______.

answer

barriers to entry and no close substitutions

question

Sam's Surfboards is the sole renter of surfboards on Big Wave Island.
If marginal revenue is positive at the actual number of surfboard rentals made each hour, then _______.

answer

the demand for surfboard rentals is elastic

question

Questions 4-8 (HW 9)

answer

...

question

A key difference between a monopoly and a perfectly competitive firm is that the monopolist ____________

answer

has a marginal revenue curve that lies below its demand curve

question

question 10-11 (HW 9)

answer

...

question

An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.

How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket?

answer

$15,000

question

Suppose a profit-maximizing monopolist faces a constant marginal cost of $20, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $1,500.

True or False?

answer

True

question

Monopolistic competition is a market in which a _____ number of firms compete by making similar but slightly _____ products.

answer

large; different

question

Firms in monopolistic competition are making positive economic profit in the short run.
______ the good produced by each firm. In the long run, all firms ______ profit.

answer

New firms enter, which decreases the demand for;

make zero economic

question

(Question 16, 17, 19, 20, 23 - HW 9) & A firm's markup is the amount by which ______ exceeds ______.

answer

price; marginal cost

question

A monopolistically competitive firm and a monopoly are alike because both... (which are true)
I. face downward sloping demand curves.
II. have marginal revenue curves that lie beneath their demand curves.
III. can make an economic profit in the long run.

answer

I & II

question

In the long run, a monopolistically competitive firm can earn ________ an economic profit and a monopoly can earn ________ an economic profit.

answer

cannot; can

question

A firm in ________ will engage in ________ to try to earn an economic profit.

answer

monopolistic competition; product differentiation

question

"In a long-run equilibrium, price is equal to average total cost." This statement applies to

answer

perfectly competitive and monopolistically competitive markets, but not to monopolies.

question

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.
(true or false)

answer

true

question

Oligopoly is a market structure in which _______.

answer

natural or legal barriers prevent the entry of new firms, and a small number of firms compete

question

A duopoly occurs when _______.

answer

two producers of a particular good compete in the same market

question

A cartel is a group of firms acting together to _____ output, _____ price, and increase _____.

answer

limit; raise; economic profit

question

The common features of all games are _______.

answer

rules, strategies, payoffs, and an outcome

question

5, 6, 8 (HW 10)

answer

...

question

In the prisoners' dilemma, when each player takes the best possible action given the action of the other player, _______.

answer

a Nash equilibrium is reached

question

In a duopoly with a collusive agreement, a firm's best strategy is to ______, and to ______.

answer

cheat if the other firm complies; cheat if the other firm cheats

question

Firms in a collusive agreement have an incentive to cheat because the profit received by a cheating firm when all other firms comply is greater than the profit received when all firms comply. (true)

answer

true

question

Game theory is the tool that economists use to analyze strategic behavior - behavior that recognizes _____ and _____ account of the expected behavior of others.

answer

mutual interdependence; takes

question

A payoff matrix is a table that shows the payoffs for each player for every possible combination of _____ the players.

answer

actions by

question

Nash equilibrium is an equilibrium in which each player takes the best possible action _____ the action of the other player.

answer

given

question

When producers agree to restrict output, raise the price, and increase profits, the agreement is called ________.

answer

.a collusive agreement

question

14-15 (HW 10)

answer

...

question

Total Revenue (TR)

answer

TR = P x Q

question

Average Revenue (AR)
how much revenue a firm receives from a typical unit of good sold

answer

AR = TR/Q = P

question

Marginal Revenue (MR)
the change in total revenue that results from selling 1 more unit of good

answer

MR = (change in TR/ change in Q) = P

*in perfect competition, the firm's marginal revenue always = the market price

1 of 48

question

answer

Q1: perfectly competitive
Q2: market demand and market supply
Q3: price

question

The price elasticity of demand for any particular perfectly competitive firm's output is

answer

infinite

question

Which of the following is always true for a perfectly competitive firm?
A.) MR = ATC
B.) P = AVC
C.) P = ATC
D.) P = MR

answer

D.) P = MR

question

answer

I, II, & III

question

(Perfectly Competitive Market) The firm's shutdown point occurs when __________________

answer

The Marginal Cost = Average Variable Cost

question

Go look at Question 6, 7, 8, 10, 13, 14 on HW 8

answer

...

question

A firm's shutdown point is the quantity and price at which the firm's total revenue just equals its

answer

total variable cost

question

In the short run, a perfectly competitive firm's economic profits ________________________

answer

might be positive, negative (an economic loss), or zero (a normal profit)

question

The short−run market supply curve is ________________

answer

the sum of the quantities supplied by all the firms.

question

If firms in a competitive market are ______, then there is an incentive for firms to _______ the market.

answer

making a positive economic profit; enter

question

When some firms exit a market in which firms incur economic losses, the market supply curve shifts ______ and the market price ______.

Each remaining firm's economic loss ________

answer

leftward; rises

decreses

question

In a perfectly competitive industry, a permanent decrease in demand initially brings a lower price, economic ________________

answer

loss, and exit from the industry

question

answer

falls

positive economic

incur economic losses

question

answer

loss of exactly $27.

question

look at question 20 on HW 8

answer

...

question

A ______ monopoly is a market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright.

answer

legal

question

A ______ monopoly is a market in which economies of scale enable one firm to supply the entire market at the lowest possible cost.

answer

natural

question

A monopoly arises for two key reasons, which are ______.

answer

barriers to entry and no close substitutions

question

Sam's Surfboards is the sole renter of surfboards on Big Wave Island.
If marginal revenue is positive at the actual number of surfboard rentals made each hour, then _______.

answer

the demand for surfboard rentals is elastic

question

Questions 4-8 (HW 9)

answer

...

question

A key difference between a monopoly and a perfectly competitive firm is that the monopolist ____________

answer

has a marginal revenue curve that lies below its demand curve

question

question 10-11 (HW 9)

answer

...

question

answer

$15,000

question

answer

True

question

Monopolistic competition is a market in which a _____ number of firms compete by making similar but slightly _____ products.

answer

large; different

question

Firms in monopolistic competition are making positive economic profit in the short run.
______ the good produced by each firm. In the long run, all firms ______ profit.

answer

New firms enter, which decreases the demand for;

make zero economic

question

(Question 16, 17, 19, 20, 23 - HW 9) & A firm's markup is the amount by which ______ exceeds ______.

answer

price; marginal cost

question

answer

I & II

question

In the long run, a monopolistically competitive firm can earn ________ an economic profit and a monopoly can earn ________ an economic profit.

answer

cannot; can

question

A firm in ________ will engage in ________ to try to earn an economic profit.

answer

monopolistic competition; product differentiation

question

"In a long-run equilibrium, price is equal to average total cost." This statement applies to

answer

perfectly competitive and monopolistically competitive markets, but not to monopolies.

question

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.
(true or false)

answer

true

question

Oligopoly is a market structure in which _______.

answer

natural or legal barriers prevent the entry of new firms, and a small number of firms compete

question

A duopoly occurs when _______.

answer

two producers of a particular good compete in the same market

question

A cartel is a group of firms acting together to _____ output, _____ price, and increase _____.

answer

limit; raise; economic profit

question

The common features of all games are _______.

answer

rules, strategies, payoffs, and an outcome

question

5, 6, 8 (HW 10)

answer

...

question

In the prisoners' dilemma, when each player takes the best possible action given the action of the other player, _______.

answer

a Nash equilibrium is reached

question

In a duopoly with a collusive agreement, a firm's best strategy is to ______, and to ______.

answer

cheat if the other firm complies; cheat if the other firm cheats

question

Firms in a collusive agreement have an incentive to cheat because the profit received by a cheating firm when all other firms comply is greater than the profit received when all firms comply. (true)

answer

true

question

Game theory is the tool that economists use to analyze strategic behavior - behavior that recognizes _____ and _____ account of the expected behavior of others.

answer

mutual interdependence; takes

question

A payoff matrix is a table that shows the payoffs for each player for every possible combination of _____ the players.

answer

actions by

question

Nash equilibrium is an equilibrium in which each player takes the best possible action _____ the action of the other player.

answer

given

question

When producers agree to restrict output, raise the price, and increase profits, the agreement is called ________.

answer

.a collusive agreement

question

14-15 (HW 10)

answer

...

question

Total Revenue (TR)

answer

TR = P x Q

question

Average Revenue (AR)
how much revenue a firm receives from a typical unit of good sold

answer

AR = TR/Q = P

question

Marginal Revenue (MR)
the change in total revenue that results from selling 1 more unit of good

answer

MR = (change in TR/ change in Q) = P

*in perfect competition, the firm's marginal revenue always = the market price

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